Frequently Asked Questions
What happens when a tourist buys goods in the UAE and returns the goods in participating stores in the UAE or abroad (if allowed by the merchant)?
Returns are allowed before the Tax Free Tag has been validated at the point of exit (the merchant will have to void the Tax Free Tag following Planet’s procedures). Returns are not allowed after the tourist has validated the Tax Free Tag at the point of exit from the UAE.
Does the tourist have to present Tax Free Tags at the time of refund when leaving the UAE?
The invoice must be attached to the Tax Free Tag and presented at the airport as part of the refund process. If not, the tourist will not receive their tax free refund at the exit point. Invoice wallets will be handed to tourists at the stores to keep their Tax Free Tag purchases organised.
What happens if the tourist claims their VAT refund and a relative then tries to refund or exchange the goods?
The person requesting the refund must be the person whose name and passport number is recorded in the Tax Free Tag transaction. The return of goods is allowed before the Tax Free Tag has been validated at the point of exit (the merchant will have to void the Tax Free Tag following Planet’s procedures). Returns are not allowed after the tourist has validated the Tax Free Tag at the point of exit from the UAE.
Can I claim a refund if the payment is made by my friend or relative using cash or credit card?
Yes, as long as the tourist exporting the goods is present during the purchase, and it is the exporter’s information that is completed for the VAT refund.
If the refund is above AED 10,000, can the tourist claim this at the airport?
The tourist can get a refund in cash up to AED 10,000, for all the Tax Free Tags that add up to that amount (or less). Once they pass that amount, the remaining tags must be refunded by credit or debit card only.
What happens if there is no cash refund counter at the border point?
The refund will be made by credit card, debit card or e-voucher where applicable.
Is there any additional cost to get a refund on a credit card by Planet or my bank?
There would be a standard currency exchange rate that would be applied to convert funds into the cardholder’s currency (where currency is not AED).
Is there any charge for a refund in cash?
There is no charge for a refund in cash, however, if a tourist wishes to exchange the refund from AED into another currency, the Cash Refund Agent’s advertised exchange rates would be applied.
Can one claim the refund before getting to the point of exit from UAE?
Is a cash refund available on both the air-side and land-side at airports?
Where available, a cash refund will only be given at the air-side.
How many days will it take for a credit card refund?
Card refunds are typically processed by Planet within 10 days, excluding the bank’s or credit card company’s own processing times.
Who does the tourist need to contact if there is a delay in the refund?
Tourists are advised to track their refund by scanning the QR code on the Tax Free Tag using a smartphone, and that will take them to a unique tracking page to see further details. If further assistance is required, the tourist can contact the Planet Customer Services team.
Can one reclaim VAT if ordering on an e-commerce website? If yes, what will be the procedure?
Yes, the invoice should be issued on the date the goods are collected in person by the tourist at a physical store, and the Tax Free Tag issued and attached to it on the same day. If the tourist pays online, the invoice must clearly state that it is an advance / deposit / booking fee and when collectiing the goods the actual sales invoice is issued on the day. Otherwise it is not possible to purchase online and claim tax free refunds.
Who is eligible?
Overseas Tourists are eligible for this type of refund. In the law, a tourist is defined as any natural person who is not resident in any of the Implementing States and who is not a crew member on a flight or aircraft leaving an Implementing State. Please note that currently, all GCC countries are considered as Non-Implementing States of the GCC VAT Treaty and therefore visitors from the other GCC states will be able to claim VAT refunds on their UAE shopping. This is subject to change in the future. Please note the tourist should be 18 years old or over to be eligible to claim a refund.
Can a resident who has cancelled his resident visa and is on the grace period for one month claim VAT on items purchased after the visa is cancelled?
Can restaurants register?
Yes, if a restaurant sells goods that are eligible under this scheme, they can register.
Who can or will be able to register for VAT?
A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.
Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.
Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.
What are the VAT-related responsibilities of businesses?
All businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case we need to establish whether they should be registered.
VAT-registered businesses generally:
- must charge VAT on taxable goods or services they supply;
- may reclaim any VAT they’ve paid on business-related goods or services;
- keep a range of business records which will allow the government to check that they have got things right
If you’re a VAT-registered business you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be made online.
If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference.
What does a business need to do to prepare for VAT?
Concerned businesses have time to prepare before VAT will come into effect in January 2018. Businesses will need to meet requirements to fulfill their tax obligations. Businesses should have started so that they will be ready later. To fully comply with VAT, we believe that businesses may need to make some changes to their core operations, their financial management and book-keeping, their technology, and perhaps even their human resource mix (e.g., accountants and tax advisers). It is essential that businesses try to understand the implications of VAT now and once the legislation is issued make every effort to align their business model to government reporting and compliance requirements. We will provide businesses with guidance on how to fully comply with VAT once the legislation is issued. The final responsibility and accountability to comply with law is on the business.
When are businesses supposed to start registering for VAT?
VAT registration has opened in October 2017 for businesses that need to be registered by 1 January 2018. Any business that is required to be registered for VAT and charge VAT from 1 January 2018 must be registered prior to that date.
According to the Federal Law No. (7) on Tax Procedures, the Authority has 20 business days to review and respond on registration applications.
Registration applications shall be submitted via the E-Services Portal on the FTA website www.tax.gov.ae
When are registered businesses required to file VAT returns?
Taxable Persons must file VAT returns with the FTA on a regular basis, within 28 days of the end of the Tax Period, which shall be:
- Quarterly for businesses with an annual turnover below AED 150m
- Monthly for businesses with an annual turnover of AED 150m or more.
The Tax returns shall be filed online using e Services.
What kind of records are businesses required to maintain, and for how long?
Businesses are required to keep records which will enable the Federal Tax Authority to identify the details of the business activities and review transactions. The documents which are required and the time period for keeping them is clarified in Federal Law no. (7) of 2017 on Federal Tax procedures and the Cabinet Decision No. (36) of 2017 on the Executive Regulation of the Federal Law No (7) of 2017 on Tax Procedures.
How long must a taxable person retain VAT invoices for?
Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.
How should a business determine the place of supply?
The place of supply will determine whether a supply is made within the UAE (in which case the UAE VAT law will apply), or outside the UAE for VAT purposes.
For a supply of goods, the place of supply should be the location of goods when the supply takes place with special rules for certain categories of supplies (e.g. water and energy, cross border supplies).
For the supply of services, the place of supply should be where the supplier is established with special rules for certain categories of supplies (e.g. cross border supplies between businesses).
Can businesses offset customs duty against VAT payments?
VAT shall be payable in addition to the custom duties paid by the importer of the goods and cannot be deducted. VAT shall be computed on the value that includes the customs duties.
How will real estate be treated?
The VAT treatment of real estate will depend on whether it is a commercial or residential property.
Supplies (including sales or leases) of commercial properties will be taxable at the standard VAT rate (i.e 5%).
On the other hand, supplies of residential properties will generally be exempt from VAT. This will ensure that VAT would not constitute an irrecoverable cost to persons who buy their own properties. In order to ensure that real estate developers can recover VAT on construction of residential properties, the first supply of residential properties within 3 years from their completion will be zero-rated.
What sectors will be zero rated?
VAT will be charged at 0% in respect of the following main categories of supplies:
- Exports of goods and services to outside the GCC;
- International transportation, and related supplies;
- Supplies of certain sea, air and land means of transportation (such as aircrafts and ships);
- Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
- Newly constructed residential properties, that are supplied for the first time within 3 years of their construction;
- Supply of certain education services, and supply of relevant goods and services;
- Supply of certain Healthcare services, and supply of relevant goods and services.
What sectors will be exempt?
The following categories of supplies will be exempt from VAT:
- The supply of some financial services (clarified in VAT legislation);
- Residential properties;
- Bare land; and
- Local passenger transport
Will there be VAT grouping?
Businesses that satisfy certain requirements covered under the Legislation (such as being resident in the UAE and being related/associated parties) will be able to register as a VAT group. For some businesses, VAT grouping will be a useful tool that would simplify accounting for VAT.
Will there be bad debt relief?
VAT registered businesses will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business. The legislation will include the conditions and limitations concerning the use of this relief.
Will there be a margin scheme?
To avoid double taxation where second hand goods are acquired by a registered person from an unregistered person for the purpose of resale, the VAT-registered person will be able to account for VAT on sales of second hand goods with reference to the difference between the purchase price of the goods and the selling price of the goods (that is, the profit margin). The VAT which must be accounted for by the registered person will be included in the profit margin. Further details of the conditions to be met in order to apply this mechanism can be found in the Executive Regulations of the Federal Decree-Law No.(8) of 2017 on Value Added Tax.
How will partial exemption work?
Where a VAT registered person incurs input tax on its business expenses, this input tax can be recovered in full if it relates to a taxable supply made, or intended to be made, by the registered person. In contrast, where the expense relates to a non-taxable supply (e.g. exempt supplies), the registered person may not recover the input tax paid.
In certain situations, an expense may relate to both taxable and non-taxable supplies made by the registered person (such as activities of the banking sector). In these circumstances, the registered person would need to apportion input tax between the taxable and non-taxable (exempt) supplies.
Businesses will be expected to use input tax (ratio of recoverable to total) as a basis for apportionment in the first instance although there will be the facility to use other methods where they are fair and agreed with the Federal Tax Authority.
What are the cases that would lead to the imposition of penalties?
Penalties will be imposed for non-compliance.
Examples of actions and omissions that may give raise to penalties include:
- A person failing to register when required to do so;
- A person failing to submit a tax return or make a payment within the required period;
- A person failing to keep the records required under the issued tax legislation;
- Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.
Will there be any special schemes for SMEs?
No special rules are planned for small or medium sized enterprises. However, the FTA is providing through its website materials and resources for these entities to assist them in their enquiries.
Will there be transitional rules?
Special rules will be provided to deal with various situations that may arise in respect of supplies that span the introduction of VAT. For example:
- Where a payment is received in respect of a supply of goods before the introduction of VAT but the goods are actually delivered after the introduction of VAT, this means that VAT will have to be charged on such supplies. Likewise, special rules will apply with regards to supplies of services spanning the introduction of VAT.
- Where a contract is concluded prior to the introduction of VAT in respect of a supply which is wholly or partly made after the introduction of VAT, and the contract does not contain clauses relating to the VAT treatment of the supply, then consideration for the supply will be treated as inclusive of VAT. There will, however, be special provisions to allow suppliers to charge VAT in situations where their recipient is able to recover their VAT but where there is no VAT clause.
How will insurance be treated?
Generally, insurance (vehicle, medical, etc) will be taxable. Life insurance, however, will be treated as an exempt financial service.
How will financial services be treated?
It is expected that fee based financial services will be taxed but margin based products are likely to be exempt.
How will Islamic finance be treated?
Islamic finance products are consistent with the principles of sharia and therefore often operate differently from financial products that are common internationally.
To ensure that there are no inconsistencies between the VAT treatment of standard financial services and Islamic finance products, the treatment of Islamic finance products will be aligned with the treatment of similar standard financial services.
Can UAE nationals claim VAT?
A scheme will be introduced to allow a UAE national who is not registered for VAT to reclaim VAT paid on goods and services relating to constructing a new residence which will be privately used by the person and his family. This will allow the recovery of VAT on such expenses as contractor’s services and building materials.
How quickly will refunds be released?
Refunds will be made after the receipt of the application and subject to verification checks, with a particular focus on avoiding fraud.
Will FTA issue rulings or provide tax advice?
In the course of its interaction with taxpayers, the FTA may provide its views on various matters in the law. Taxpayers may choose to challenge these views. It should be noted that penalties may be imposed on taxpayers who are found to violate any tax laws and regulations.
Will it be possible to issue cash receipts instead of VAT invoices?
A supplier registered or required to be registered for VAT must issue a valid VAT invoice for the supply. To be considered as a valid VAT invoice, the document must follow a specific format as mentioned in the legislation. In certain situations the supplier may be able to issue a simplified VAT invoice. The conditions for the VAT invoice and the simplified VAT invoice are mentioned legislation.
Will there be any VAT that businesses are not allowed to claim?
VAT will not be deductible in respect of expenses incurred for making non-taxable supplies. Furthermore, input tax cannot be deducted if it is incurred in respect of specific expenses such as entertainment expenses e.g. employee entertainment.
Under which conditions will businesses be allowed to claim VAT incurred on expenses?
VAT on expenses that were incurred by a business can be deducted in the following circumstances:
- The business must be a taxable person (the end consumer cannot claim any input tax refund).
- VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).
- The business must hold documentation showing the VAT paid (e.g. valid tax invoice).
- The goods or services acquired are used or intended to be used for making taxable supplies.
- VAT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.
Will non-residents be required to register for VAT?
Non-residents that make taxable supplies in the UAE will be required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on these supplies. This exclusion may apply, for example, where a UAE business is required to account for VAT under a reverse charge mechanism in respect of a purchase from a non-resident.
Will VAT be paid on imports?
VAT is due on the goods and services purchased from abroad.
In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, VAT would be due on that import using a reverse charge mechanism.
In case the recipient in the State is a non-registered person for VAT purposes, VAT would be paid on import of goods from a place outside the GCC. Such VAT will typically be required to be paid before the goods are released to the person.
How will Government Entities be treated for VAT purposes?
Supplies made by government entities will typically be subject to VAT. This will ensure that government entities are not unfairly advantaged as compared to private businesses.
Certain supplies made by government entities will, however, be excluded from the scope of VAT if they are not in competition with the private sector or where the entity is the sole provider of such supplies. It is likely certain government entities will be entitled to VAT refunds – this is designed to avoid budgeting issues and provide a level playing field between outsourced and insourced activities.
For the supplies provided for government entities, the treatment of such supplies shall depend on the same supply and not on the recipient of the supply. Therefore, if the supply is subject to the standard tax rate, the treatment would remain the same even if it is provided to a government entity.
Will Businesses have to report on their business in each of the Emirates?
Businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate.
Further detail on this can be found in the Executive Regulation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax.
Will the goods exempt from customs duties also be exempt from VAT?
Not necessarily. Some goods that are imported may be exempt from customs duties but subject to VAT.
Why is the UAE implementing VAT?
The UAE Federal and Emirate governments provide citizens and residents with many different public services – including hospitals, roads, public schools, parks, waste control, and police services. These services are paid for from the government budgets. VAT will provide our country with a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
What is VAT?
Value Added Tax (or VAT) is an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.
VAT is one of the most common types of consumption tax found around the world. Over 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia.
VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.
A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain. To explain how VAT works we have provided a simple, illustrative example below (based on a VAT rate of 5%).
Will VAT cover all products and services?
VAT, as a general consumption tax, will apply at 5% to all transactions of goods and services unless specifically exempted in Article (46) of the Federal Decree-Law No. (8) of 2017 on Value Added Tax or subject to a rate of Zero as per Article (45) of the Federal Decree-Law.
When will the VAT go into effect and what will be the rates?
VAT will be introduced across the UAE on 1 January 2018 at a standard rate of 5%.
Why does the UAE need to coordinate VAT implementation with other GCC countries?
The UAE is part of a group of countries which are closely connected through “The Economic Agreement Between the GCC States” and “The GCC Customs Union”. The GCC group of nations have historically worked together in designing and implementing new public policies as we recognize that such a collaborative approach is best for the region.
What is the difference between VAT and Sales Tax?
A sales tax is also a consumption tax, just like VAT. For the general public there may be no observable difference between how the two types of taxes work, but there are some key differences. In many countries, sales taxes are only imposed on transactions involving goods. In addition, sales tax is only imposed on the final sale to the consumer. This contrasts with VAT which is imposed on goods and services and is charged throughout the supply chain, including on the final sale. VAT is also imposed on imports of goods and services so as to ensure that a level playing field is maintained for domestic providers of those same goods and services.
Many countries prefer a VAT over sales taxes for a range of reasons. Importantly, VAT is considered a more sophisticated approach to taxation as it makes businesses serve as tax collectors on behalf of the government and cuts down on misreporting and tax evasion.
How will the government collect VAT?
Businesses will be responsible for carefully documenting their business income and costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods / services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.
Will the cost of living increase?
The cost of living is likely to increase slightly, but this will vary depending on the individual’s lifestyle and spending behavior. If your spending is mainly on those things which are relieved from VAT, you are unlikely to see any significant increase.
What measures will the government take to ensure that businesses don’t use the VAT implementation as an excuse to increase prices?
VAT is intended to help improve the economic base of the country. Therefore, we will include rules that require businesses to be clear about how much VAT you are paying for each transaction. You will have the required information to decide whether to buy something or not.
Does the owner of real estate have to register for VAT?
The owners of residential buildings do not have to register for VAT if they do not have any other business activities. Where owners have other business activities, they should consider their obligations further.
The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceeds AED 375,000 or it is expected that they will exceed AED 375,000 over coming 30 days.
Can a real estate owner recover VAT paid in relation to real estate?
An owner of residential building will not be able to recover VAT in respect of expenses related the exempt supply of the residential buildings.
An owner of a commercial building will generally be able to recover VAT in respect of expenses related to the supply of the building.
How is a mixed-use building (residential and commercial) treated for VAT?
The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply.
The rent or sale of a commercial part of the building shall be treated as subject to VAT at 5%.
The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.
Will VAT be charged on the property I am renting?
The rent of residential building will generally be exempt from VAT.
The rent of commercial building will be subject to VAT at 5%
1. When to deregister for VAT?
You must mandatorily deregister for VAT in case where you have stop conducting business or your taxable turnover is less than the voluntary registration threshold limit of AED 187,500. You may also apply for deregistration on a voluntary basis where your taxable turnover exceeds the voluntary registration threshold limit of AED 187,500 but is still below the mandatory registration threshold limit of AED 375,000.
2. What is the time limit to submit a VAT deregistration application with the FTA?
You must submit the application for deregistration from VAT within 20 business days from the date of occurrence of the event that requires you to deregister with the FTA under Article 21 of the VAT Law.
3 How does a VAT Deregistration process works?
Generally, a VAT Deregistration application involves following steps:
a) Submit a VAT Deregistration application through your online account with accurate reasoning, effective date for de-registration and upload all the relevant supporting documents
b) Submit your final VAT return as notified to you by the FTA upon review of the deregistration application
c) Settle all your outstanding liabilities with FTA including any penalties pending for payment or submit your refund application if you are in a credit position at the time of submission of the deregistration
4. What is a Final Return?
Final tax return is the return for the last tax period for which you were registered with the FTA as a taxpayer. The final tax period ends on the effective date of de-registration as approved by the FTA. The final tax return should be submitted and payable tax should be settled no later than 28 days from the effective date of de-registration (i.e. from the end of the final tax period). Failure to apply with the FTA for de-registration and/or filing of final tax return or settlement of payable tax within deadline would be subject to penalty and potential delay in completing the de-registration process.
5. Who can submit the application for Deregistration?
The application can be submitted to FTA by you (VAT Registrant), your tax agent or legal representative.
6. What is considered as a late Deregistration case and will I be penalized by the FTA?
The failure of the Registrant to submit a deregistration application within the timeframe specified in the Tax Law, the penalty is 1,000 AED in case of a delay and on the same date monthly thereafter, up to a maximum of 10,000 AED.
7. Can I save the application as a draft to be updated later? If yes, for how long
Yes, you can save the in-progress application (as a draft) and complete it at a later point in time. However, if you do not submit your application within 60 calendar days of initiating it, your application will be automatically cancelled. There will be reminder notifications sent to your registered email/verified mobile.
8. Should I deregister my VAT TRN from Planet (Tourist refunds system) if I am registered with Planet?
Yes. Deregistering your VAT TRN from Planet is mandatory if you are registered with Planet in order to complete your VAT deregistration.
9 What will happen once the application is submitted to the FTA?
1. Processing your application:
a) Your application will now be reviewed. If we require more information to assist with our review, we will contact you by email. You will need to provide the information requested for us to continue processing your application.
b) Once we have completed our review, we will either approve or, in some cases, may have to reject the application. You will be notified by email of our decision. To complete your VAT deregistration, you may need to file your final return as per the prescribed time limit provided by us and complete the payment of the outstanding liabilities.
c) Where we reject an application, we will provide you with the reasons for doing so. You may re-apply but only once you have resolved the matters brought to your attention.
2. VAT deregistration certificate:
a) Following approval of your deregistration application, your VAT Registration Number (TRN) would be deregistered and you will be notified by mail. You can download your VAT deregistration certificate from your EmaraTax account
10. How to check the status of the deregistration application with the FTA?
To review the status of your VAT deregistration application, click on the Dashboard tab and look next to Status:
• Drafted – means you have started drafting the deregistration application form but has not completed or submitted yet;
• In Review – means the deregistration application has been received by us and is under processing
• Awaiting Information – means FTA is awaiting for additional information from the registrant
• Rejected – means the deregistration form has been rejected by the FTA;
• Pre-Approved for Final Returns – means the deregistration application has been pre-approved by the FTA. Deregistration will be completed only post the final return submission by the Registrant.
• Approved – means you are now deregistered for VAT with the FTA
11. Does pre-approved status means that my VAT deregistration is completed?
No. Pre-approval status is only one of the many steps in your deregistration application journey. Your VAT deregistration is not completed unless you file the final return with us.
12. Do I still need to file my returns during the time of my application review with the FTA.
Yes. You are obliged to file all the VAT returns within the respective due dates until the deregistration application is reviewed and the final return is generated.
13. What is the estimated time to complete does FTA takes to deregister me upon submission of the deregistration application?
Generally, estimated time to complete the application by the FTA is 20 business days from the date the completed application was received. However, in case where any additional information is needed FTA may take additional time to process the application.
14. Does deregistration result in deactivating the relevant EmaraTax account?
The EmaraTax account is not deactivated upon deregistration and remains accessible. The status for VAT Registration will be updated.
1. Can the FTA refund payments made erroneously or in excess without submitting a refund request?
To obtain a refund in the payments made erroneously or in excess, a refund request must be submitted.
2. Can the payments done erroneously or in excess be kept as credit?
Yes, any credit can be carried forward to subsequent tax periods to offset against future payable tax or any administrative penalties imposed.
3. Will there be any offsetting rules for the refund claim I requested for if I have outstanding liabilities?
Yes, processing of refund amount will happen after offsetting against the payable amount in your account. We shall offset the amount applied to be returned against different tax types as well as any other payable tax or administrative penalties.
4. What is the due date for submitting a refund for the excess payments?
You can submit a VAT refund claim at any time after the submission of your VAT returns.
5. Can I provide the details through an offline utility?
Yes, you can complete the information as requested in the ‘Excel Summary Format’ spreadsheet with information about you/ your business and detailed invoice requirements corresponding to your VAT return
6. What is the estimated timeframe to receive a response from the FTA after submission of your application?
The estimated time to complete the application by the FTA is 20 business days from receipt of a completed request. In certain instances however, the FTA may require additional time to process your request and the FTA will inform you when this is required. If the request submitted is incomplete and the FTA requires additional information, you will need to provide the additional information and re-submit the application and once submitted the time process will reset.
7. If the application is approved, how long would it take to process the refund?
Once your claim is approved, the FTA will aim to issue the refund within 5 business days. The refund will be paid in United Arab Emirates dirhams (AED). Please note that the actual transfer of the funds and receipt of the payment will depend on the receiving bank. The receiving bank may also impose additional charges.
8. Can I request for partial refund?
Yes, you can request for full or partial refund.
1. When are you required to submit a VAT return?
You are required to submit VAT returns when you are registered with the FTA for VAT purposes.
2. What is the Return Filing Period in UAE VAT?
The standard VAT return filing period is on a quarterly basis. Only few businesses are expected to file their VAT returns on a monthly or half yearly basis.
The standard tax period shall be a period of three calendar months ending on the date that the FTA determines. The FTA may, at its discretion, may assign a different Tax Period other than the standard one i.e. monthly or half yearly, to a certain group of Taxable Persons.
3. Is it Mandatory for you to submit a VAT return if you are registered with the FTA?
Yes, it is mandatory for all the registered businesses to submit the VAT return, therefore you are required to submit VAT return for each tax period.
4. How to submit the VAT returns?
All VAT returns should be submitted using the portal. The return can be submitted by you or another person who has the right to do so on your behalf (for example, a Tax Agent or a Legal Representative). VAT returns should be completed and verified before submitted.
5. Would you be to able to edit VAT returns after submission?
Yes, in case if any discrepancies are identified, you will be able to edit a submitted VAT Return of a tax period before the filing due date of each tax period.
6. What if the due date for the submission of the VAT Return and the corresponding payment falls on a weekend or a national holiday?
Where the due date for the submission of the VAT Return and the corresponding payment falls on a weekend or a national holiday, the deadline for filing the VAT Return or making a payment is extended to the first business day thereafter.
7. What happens when input VAT exceeds output VAT in the VAT return?
You will be able to request a VAT refund after submission of the VAT return.
8. Should you file a VAT Return if there is no business transaction in a tax period?
Yes, if there is no business transaction in a tax period, you should submit a “nil” VAT Return by the respective due date.
9. What details are required to be reported in the VAT return?
Details regarding the supplies made and received during a tax period are required to be reported in the VAT return of each tax period.
10. What are the different categories under which supplies made can be classified in a VAT return?
The supplies made can be classified as standard rated sales, zero rated sales or as an exempt sales.
11. Under which Emirate the standard rated supplies should be reported?
The supplies made should be identified by the Emirate in which that supply was made. If you have a fixed establishment in the UAE, the supply should be reported in the Emirate where the fixed establishment most closely connected to the supply is located. If you are a non-established business, the supply should be reported in the Emirate where the supply was received.
12. Where you are required to report bad debt relief?
You can use the adjustment box in the VAT return for any adjustments required to output tax as a result of adjustments for Bad Debts.
13. What does the box Tax Refunds provided to Tourists under the Tax Refunds for Tourists Scheme relates to?
If you are a retailer and you are registered to provide Tax Refunds to tourists in the UAE under the official Tourists Refund Scheme, the values of Tax Refunds provided will be prepopulated in this box. The amounts reported in this box, if negative, will reduce your total output tax liability. The values in this box are no longer editable.
14. What sectors will be zero rated?
VAT will be charged at 0% in respect of the following main categories of supplies:
• Exports of goods and services to outside the GCC;
• International transportation, and related supplies;
• Supplies of certain sea, air and land means of transport (such as aircraft and ships);
• Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
• Newly constructed residential properties, that are supplied for the first time within 3 years of their construction;
• Supply of certain education services, and supply of relevant goods and services;
• Supply of certain healthcare services, and supply of relevant goods and services.
15. What are the categories of exempt supplies?
The following categories of supplies will be exempt from VAT:
• The supply of some financial services;
• Residential properties (excluding the first supply of newly constructed residential property which qualifies for the zero-rating treatment);
• Bare land; and
• Local passenger transport.
16. What are the different categories under which purchases made can be classified in a VAT return?
The purchases made can be classified as local standard rated purchases or foreign purchases subject to VAT under the reverse charge mechanism.
17. What amounts are required to be reported for local standard rated purchases?
You are required to report all the expenses subject to the standard rate of VAT for which you would like to recover Input Tax.
18. What is required to be reported in the adjustments column provided for standard rated expenses?
You should use the Adjustments column only to record any adjustments made to the input tax due as a result of any claims for VAT Bad Debt Relief made by your supplier, record any input tax apportionment annual adjustments record any Capital Assets Scheme adjustments.
19. How the reporting for foreign purchase of goods and services should be done?
The value of supplies of goods and services received from a foreign supplier which are subject to VAT under the reverse charge mechanism would be required to be reported in the VAT return as an output as well as an input supply. Thus, in most instances, there will be no VAT impact.
• For the imports of services where you are required to account for the VAT, you should report output VAT in box 3.
• If you import goods into the UAE, box 6 will be pre-populated to include the net value and the output tax (i.e. VAT amount) due on goods which have been imported into the UAE. This will include all imports which have been declared through UAE Customs where payment of the VAT on import is to be made on the VAT return. The amounts reported in this box are auto-populated based on imports you have declared under your customs registration number, which should be linked to your TRN. In case of any deviations with your book of accounts, it is your responsibility to make an adjustment in box 7 of the VAT return.
• Where the movement of the purchase of goods was not declared via UAE Customs for some reason, you will be required to report the values in box 3 of the VAT return.
20. Where you should report recovery in relation to foreign purchases?
If you are entitled to recover the VAT on the foreign supply as input tax, you will be required to recover the VAT amount in Box 10 of the VAT return.
21. What if the next step if your next tax position is recoverable?
If you are in a net recoverable position, an option will be available on the VAT Return to request a refund of the excess recoverable tax. If is selected, you will be required to complete the VAT refund application (Form VAT311) after the VAT Return Form is submitted. If you select ‘No’, your excess recoverable tax will be carried forward to subsequent Tax Periods and can be used to offset against payable tax and/or penalties.
22. Is the Profit margin scheme applicable on you?
To avoid double taxation where second-hand goods are acquired by a registered person from an unregistered person for the purpose of resale, the VAT-registered person will be able to account for VAT on sales of second-hand goods with reference to the difference between the purchase price of the goods and the sale price of the goods (that is, the profit margin). The VAT which must be accounted for by the registered person will be included in the profit margin. Further details of the conditions to be met in order to apply this mechanism can be found in the Executive Regulations of the Federal Decree-Law No.(8) of 2017 on Value Added Tax. If the profit margin scheme is applicable to you then select ‘yes’, otherwise ‘No’.
23. Should you file a VAT Return if there is no business transaction in a tax period?
Yes, if there is no business transaction in a tax period, you should submit a “nil” VAT Return by the respective due date.
24. What are the Common requirements when completing the VAT Return?
When completing each box of the VAT Return, you must :
• Insert all amounts in United Arab Emirates Dirhams (AED)
• Insert all amounts to the nearest fils (the form allows for two decimal places)
• Complete all mandatory fields
• Use “0” where necessary and where there are no amounts to be declared
25. Can I save the VAT return as a draft to be updated later? If yes, for how long.
Yes, you can save the VAT return (as a draft) to work at a later point in time. However, the VAT return must be submitted to the FTA on or before the due date of the return submission.
26. Are you required to upload supporting documents as part of the submission of the VAT return?
No documents are required to be uploaded as part of the submission of the VAT return on the FTA portal.
27. What if the discrepancies are identified by you after the due date of submission of a VAT Return?
Where the discrepancy is identified after the due date, you are required to rectify the discrepancy either through the submission of a Voluntary Disclosure for that tax period or as an adjustment in the Tax Return for the tax period in which the error has been discovered.
28. Who is responsible for the VAT return?
You are responsible to ensure the correctness of the VAT return.
29. VAT Return Penalties
VAT Returns must be submitted within the specified deadline, otherwise, a penalty of AED 1,000 will be imposed for the first time of occurrence of a delay. In case of repetitive non-compliance within 24 months, the penalty will be increased to AED 2,000 for each tax period. Additionally, a delay in VAT payment would result in a late payment penalty.
30. Are there any publications or guide available on the FTA portal providing detailed steps to submit a VAT return?
Yes, refer to the video and the user manual included in the service card.
1. How is the TRC received?
Once issued, the TRC can be downloaded from the TRC platform:
2. What is the TRC’s validity period?
The TRC is valid for one year from the beginning of the financial year selected by the applicant.
3. What are the cases that may prevent the completion of attesting the tax form?
The certificate was not issued for any reason. For example, the electronic application was rejected, the issuance of the certificate was not paid in the electronic system.
The applicant section (in the form) has not been filled out.
The applicant did not sign the form.
100,000$ /375,000 AED
WHY CORPORATE INCOME TAX (CIT)?
The CIT regime has been implemented by the UAE in view of achieving the following objectives:
• Cementing the UAE’s position as a world-leading hub for business and investment;
• Meeting international standards for tax transparency and preventing harmful tax practices; and
• Accelerating the UAE’s development and transformation to achieve its strategic objectives.
WHAT!!!! FOR WHOM?
CIT will apply on the adjusted worldwide accounting net profits of the business. The UAE CIT regime introduces two different rates:
• A 0% tax rate will apply for taxable profits up to an amount to be specified in a Cabinet Decision, although the FAQ’s refer to a threshold of AED 375,000.
• The standard statutory tax rate will be 9 per cent. Because of the low tax rate, the UAE will continue to be highly competitive at a global level.
Article 69 of the UAE CIT Law provides that the Law will apply to Tax Periods starting on or after 1 June 2023.
Businesses with a financial year starting 1 January will be subject to CIT as from 1 January 2024.
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The Federal Tax Authority (FTA) of the United Arab Emirates (UAE) published amendments to the Federal Tax Procedures (Tax Procedures Law). The amendments are made to Federal Decree-Law No. 7 of 2017, which had already been amended by Federal Decree-Law No. 28 of 2021. The new Law will be applicable as from 1 March 2023 and counts 57 articles, instead of the 54 previous articles. It is likely that the Executive Regulations to the Federal Tax Procedures Law will be amended as well, and that the FTA issues a Public Clarification explaining the intent behind the changes, as it did with the 2021 changes. The previous changes, effective 1 November 2021 with respect to an amended appeals procedure, an alternative mechanism for disputes involving government entities, and the installment of a waiver committee have been kept.
An overview of the major changes is below:
• Addition or amendments to the following definitions including the following:
o Business day – a confirmation that weekends are not business days;
o Tax – leaving room for the application of the Federal Tax Procedures Law to Corporate Tax;
o Business – leaving room for other definitions of “business” in other legislations. This is likely a reference to the Corporate Tax Law defining what types of legal persons and natural persons are in scope of Corporate Income Tax;
o Tax Return – a broadening of the term to include attachments and schedules, again in preparation of Corporate Income Tax;
o Tax Registration – an amended definition allowing for automatic registrations of tax payers;
o Tax Audit – the removal of the reference to the term “Business”, which may indicate broader investigative powers for the FTA;
o Tax Residency Certificate – an added definition;
• In Article 5, on the language of communication, the article consists of a new clause (3), which stipulates that the Person who submits any translated copies of date, information, records or any other document to the FTA, shall be responsible for the accuracy and correctness of such copies and bear the associated costs. Further, the FTA has the right to rely on the translation provided by such Person.
• Article 7, which deals with the responsibilities of the Legal Representatives, provides for the following additional responsibilities:
o The Legal Representative shall inform the FTA within 20 business days from the date of appointment by the Taxable Person;
o The Legal Representatives shall submit returns on behalf of the Taxable Person;
o The Legal Representative shall comply with the requirements of the Tax Procedures Law and any federal law pursuant to which a tax is imposed.
• Article 10, 5 now states that a Voluntary Disclosure must be submitted for a Tax Return when an error is discovered, even where is no difference in the tax due. The guidance in this respect will need to be updated, since this currently refers to the AED 10,000 threshold.
• Article 9, which deals with allocating Payable Tax upon Settlement, contains a small amendment, to provide that if a Taxable Person pays more than the payable tax amount or has a credit balance with the FTA, the FTA shall have the right to allocate that amount, or the balance to pay any obligated amount, in accordance with the provisions of the Executive Regulations.
• Regarding tax audits, the Tax Procedures Law now provides in article 16 that the taxpayer is to be given a notice of 10 business days (previously, the requirement was 5 business days) for the FTA to initiate audit procedures. Likewise, the notice period for communicating the results of a tax assessment has also been increased from 5 business days to 10 business days.
• The FTA can now also issue estimated tax assessments, under article 23, 2, a practice hitherto unknown in the UAE, but in practice in other jurisdictions.
• Article 24, the provision dealing with Administrative penalties, amends the maximum cap of administrative penalties imposable, up to two (2) times the tax amount. Previously, the cap was 3 times. The minimum of AED 500 has also been removed.
• Under certain circumstances, tax agents or Legal Representatives can also be fined, and be held liable for the payment of such fines on behalf of the tax payer. This change in approach address certain practices found with tax agents currently.
• Article 25, which now deals with tax crimes, states the following:
o For violations of deliberately failing to settle payable taxes, understatement of business value for registration purposes, collecting taxes without being registered, and decreasing payable taxes, the punishment prescribed is a prison sentence and / or monetary penalty not exceeding three (3) times the evaded tax (down from 5 times in the previous version of the Tax Procedures Law).
o For violations of deliberately providing false information, concealing or destroying documents or other material, stealing, misusing or causing the destruction of documents, or preventing the FTA’s employees from performing their duties, the punishment prescribed is a prison sentence and / or a penalty not exceeding AED 1,000,000 (One Million Dirhams).
o Criminal participation may expose the participants to the same penalties as for the chief crime committed. Reoffending is an aggravating circumstance.
• Tax crimes are now subject to a specific procedure laid down in article 26 of the Tax Procedures Law. It now also contains express rules around confiscation. In addition to this, a reconciliation procedure is available for tax crimes.
• Article 39, the provision dealing with tax refund, now provides that the FTA should not hold off processing a tax refund application when the taxpayer is under an audit, unless the conditions set out in a (to be published) decision of the FTA’s Board of Directors have been met.
• On collection of taxes, the following amendments have been made:
o Where according to the FTA, the taxes due may be at a risk of being lost or jeoparised, the Director General may request a judge from a Competent Court to issue an order of seizure of property owned by the person as equivalent to payable taxes. This is a confirmation of a practice the FTA already applied.
o Taxes and other dues to the FTA shall have precedence over other debts except for judicial expenses. This provision establishes a ranking of creditors, establishing priority for judicial debts, then tax debts, and subsequently all other debts. Further analysis will be required to analyze whether this provision is not in violation with other Federal laws, such as the bankruptcy law.
o Any payment received as taxes must be remitted to the FTA.
• Article 46, dealing with the Statute of Limitation, has been amended in line with the equivalent provisions under the recent amendments in the VAT and the Excise Tax Law.
• Article 28, dealing with the Dispute Resolution Process, has been added, providing a facility to the FTA to review its tax assessment and any related administrative penalties (paid in part or in full), within 40 business days of receiving the tax or penalty assessment. To avail this facility, such person must not have already submitted a reconsideration application in relation to the same assessment. This is therefore a step to be taken before he reconsideration. It is currently not clear to what extent the review process and the reconsideration process are substantially different. It does not appear to be a mediation step.
• Article 32, providing for the requirements for submitting an objection to the Tax Disputes Resolution Committee (TDRC), now includes a provision stating that the Cabinet may issue a decision adjusting the required amount of tax payable to the FTA prior to submitting the objection application.
• Article 35, dealing with timelines, provides that upon meeting certain criteria, both the person (submitting the tax assessment review request, reconsideration and objection applications), as well as the FTA or TDRC, may be granted the right to request for an extension of the standard timelines of 40 business days. If the person is not granted the extension, the decision issued by the FTA or TDRC is final and not appealable.
The Authority may issue a Notification requiring a Person to provide any information
or any Documents in relation to himself or another Person, if these Documents or
information are considered necessary by the Authority.